The year 2005 brought more joy to Amit Singh and Balraj Singh than 2000 when they founded Peribit Networks in Santa Clara, CA. Juniper Networks acquired Peribit— a player in the growing market for Wide Area Network (WAN) and data center acceleration—for a whopping $337 million.

The acquisition signifies the growing trend of large players to combine different solutions in fewer devices leading to a rapid consolidation in the market for network technologies.

Many entrepreneurs like the Singhs may see their wish come true this year if they follow the venture capital money. Interest in old market business models and applications has waned and startups that offer enterprises innovative and secure solutions are attracting big money from the VCs. “It is hard for venture backed startups to compete against incumbents like the Cisco in the U.S. and Alcatel in the Europe. Startups working on the fringes of the technology developed by these companies has turned out to be an absolutely good market,” says Arvind Purushotham, managing director, Menlo Ventures.

In 2005, VCs invested $1.4 billion in 160 companies in this space, though it tanked to an eight-year low point, according to PricewaterhouseCoopers’ MoneyTree Survey. The venture capital community will continue to invest in areas that will have impact in 2006 and beyond. Next-generation social networking and search, compliance based technology, enterprise architecture, mobilization of almost everything, and convergence of technologies and devices are areas that most VCs are currently looking at.

Jo Tango, general partner at Highland Capital Partners advises entrepreneurs, “Take the opportunity that takes the friction between the buyer and the seller. I would take the opportunity that takes the friction out of a supplier of the data and the consumer of information.”